MercoPress. South Atlantic News Agency

Flow tests begin to probe commerciality of Falklands’ oil discovery

The Ocean Guardian rig is back at Sea Lion well

The North Falkland oil and gas exploration company Rockhopper Exploration plc (AIM: RKH) announced Monday that the Ocean Guardian drilling rig is on location at the Sea Lion prospect where oil was discovered in a drilling last April/May. Operations now are concentrated on the flow test of the Sea Lion main and lower fans.

The test of Sea Lion will be a key step on the road to proving commerciality of the discovery.

Rockhopper cautions that while testing can be more sensitive to weather conditions than standard drilling operations, the company anticipates that operations will be completed in approximately 30 days when a further announcement will be made on completion of operations.

Rockhopper was established in February 2004 to carry out an offshore oil exploration program to the north of the Falkland Islands.

The Company floated on AIM in August 2005 and holds a 100% interest in four offshore production licences: PL023, PL024, PL032 and PL033 which cover approximately 3,800 sq. km. Rockhopper has also farmed in (7.5% working interest) to licences PL003 and PL004, which are operated by Desire Petroleum.

These licences have been granted by the Falkland Islands government.

In February 2010, the Ocean Guardian drilling rig arrived in Falkland waters to carry out a multi-well drilling campaign. Rockhopper drilled an exploration well on its Sea Lion prospect during April and May 2010, the result of which is the first oil discovery and Contingent Oil Resource in the North Falkland Basin.

The well was drilled to a depth of 2,744 metres penetrating what the Company believes is a regional seal between 2,250 metres and 2,374 metres subsea. Based on log analysis, well site evaluation of shows and samples, sidewall cores and wire-line formation testing, it appears that all sands encountered beneath this regional seal at the Sea Lion location are charged with oil and no oil water contacts were encountered.

The top oil sand in the Sea Lion well was encountered at 2,374 metres subsea, and the base of the lowest oil sand (“oil down to”) level was encountered at 2,591 metres subsea. The total vertical oil column is 217 metres (712 feet), with total net pay of 53 metres in seven identified pay zones, the thickest of which is approximately 30 metres.

At the time Managing Director Sam Moody said that “Rockhopper has now confirmed the first Contingent Oil Resource in the Falklands. Our analysis of the data from the Sea Lion well suggests that there is significant potential upside on our acreage and our technical effort will now focus on integrating all of our new knowledge of the basin so we can understand and identify the best prospects for future drilling”.

“The test of Sea Lion will be a key step on the road to proving commerciality. We believe that, with modern horizontal completions and water injection in sands of the quality encountered, recovery factors significantly above the 15% assumed in the P90 case could be achieved. Furthermore, our recently updated economic model indicates that a stand alone field of 60mmbbls recoverable could be commercial at oil prices down to US$50 per barrel”, concluded Moody back in May.